Most times, I’m a fan of debunkers. People who question prevailing wisdom and strip the candy coating off of core falsehoods deserve praise, because they deliver real value to our society. But the potshots taken in recent weeks against Thomas J. Stanley have left me wondering whether these intellectual snipers are missing the point.
Stanley was co-author of The Millionaire Next Door, a hugely successful book that argued most millionaires were less likely to be WASP attorneys in bespoke suits than first- or second-generation owners of small, often drab businesses. True millionaires dress simply, spend less than they earn, accumulate wealth gradually, and don’t hand over sacks of cash to their kids, Stanley wrote. Those flashy types you might think are the real millionaires may earn a lot of money, but they spend it just as fast—or faster.
“Wealth is not the same as income,” Stanley and co-author William Danko wrote. “If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”
Not so fast, the boo birds chirped. In his March 10 column, Los Angeles Times columnist Michael Hiltzik noted how one economist pointed out the “survivors bias” in Stanley’s data: He trumpeted what likely were the few who achieved success while ignoring the undoubted millions who had launched businesses and failed.
Hiltzik also took aim at the notion that self-denial always trumps spending. “The Millionaire Next Door elevated self-abnegation to an investment rule,” he declared. Several critics pointed out that Stanley died while driving a Corvette.
Elsewhere on the web, author Helaine Olen argued in a column on The Baffler website that “The Millionaire Next Door was already describing a vanishing world when it was published” nearly two decades ago. “The book offers a virtuous cover for the financial sacrifices all too many are forced to make,” she concludes, “telling its often-struggling readers that their cutbacks and continued downsizing will lead not to more sacrifices, but to prosperity.”
I’ll accept that Stanley’s monument has some chips in it. But I also noticed that the debunkers’ arguments lacked something important: an alternative path to getting rich.
The most successful role models in this business that I have met learned two rules early on. First, they weren’t remodelers; rather, they were in the remodeling business. And second, what you keep often is more important than what you make.
Rule No. 1 is mandatory—and something that, alas, the vast majority of remodelers never learn. I’ve had veteran observers of this business estimate to me that no more than 5% of remodelers know what a budget is, much less keep it.
The second rule is embraced even less often. I’ve heard remodelers get into raging arguments when one contemplates cutting margins to get more business. Why would you do that, the others demand. What good is taking in more revenue if reduced margins mean you’re not making any more money at the end (and probably working more hours, to boot)? To this group, small and lucrative is the goal.
So who are you, and what do you want to be? I hope you view yourself as being in the remodeling business. And once you do, pick up a copy of The Millionaire Next Door. But save some cash; Odds are, you can check one out for free at your public library.
